The bulls were awakened from their January slumber on Monday as the Dow posted its second-biggest rally of 2010 after ExxonMobil's earnings beat and the best ISM manufacturing report in more than five years renewed some confidence in the U.S. economic recovery.
Today’s Markets
The Dow Jones Industrial Average rose 118.20 points, or 1.17%, to 10185.53, the Standard & Poor's 500 added 15.32 points, or 1.43%, to 1089.19 and the Nasdaq Composite picked up 23.85 points, or 1.11%, to 2171.20. The FOX 50 gained 8.70 points, or 1.11%, to 790.85.
Monday's triple-digit rally, which was driven by soaring energy and basic materials stocks, allowed the markets to recoup virtually all of last week's tumble and bounce off their lowest levels since early November. While the Dow posted its biggest point and percentage gain since Jan. 4, the rally came on very light volume, suggesting a possible lack of conviction in the move.
“I’m kind of underwhelmed [with the rally] given the hammering the market has taken," said Michael James, senior equities trader at Wedbush Morgan Securities, who pointed to the light volume. “People are a little more interested in taking on risk today than last week. I think we need a couple of more days like today to be able to draw any conclusions on it.”
Unlike last week, when the markets failed to rally around robust earnings reports and the best gross domestic product figures in almost seven years, Wall Street cheered a stronger-than-expected ISM manufacturing report, upbeat economic news out of China and ExxonMobil's (XOM: 66.19, 0, 0%) earnings report.
“Finally today we’re getting the well-deserved bounce,” said Ryan Detrick, equities analyst at Schaeffer’s Investment Research. “ISM showed the economy seems to be turning around.”
Almost every blue-chip stock advanced on the day, led by Alcoa (AA: 13.36, 0, 0%), DuPont (DD: 33.68, 0, 0%) and Exxon. The index's laggards were Walt Disney (DIS: 29.53, 0, 0%) and 3M (MMM: 80.43, 0, 0%), which inched just fractionally lower.
Monday's rally picked up steam after the Institute for Supply Management said its manufacturing index unexpectedly soared to a 58.4 reading in January — its highest level since Aug. 2004. Analysts had expected the closely-watched index would rise to a 55.5 reading after hitting 54.9 in December. In China, a similar index run by HSBC soared to a record high of 57.4 in January, underscoring the robust recovery in Asia.
Shares of basic materials stocks, which are considered economically sensitive, surged 4% in the wake of the U.S. and Chinese data, with U.S. Steel (X: 47.34, 0, 0%) and Southern Copper (PCU: 28.56, 0, 0%) seeing even heavier buying. The group was also boosted by a weaker U.S. dollar, which sent gold up $21.30 a troy ounce, or 1.97%, to $1104.30.
At the same time, the energy sector jumped 3% thanks to the economic headlines and ExxonMobil, which posted its largest percentage gain since July 2009. The energy giant reported a stronger-than-expected profit of $6.05 billion, or $1.27 a share. Revenue came in at $89.84 billion, blowing away the Street’s view of $86.19 billion. Energy stocks were also helped by the currency fluctuations, which sent crude oil up $1.54 a barrel, or 2.11%, to $74.43.
Wall Street managed to shrug off a new report revealing consumer spending rose just 0.2% in December, missing estimates for a rise of 0.3%. The Commerce Department also said personal incomes rose 0.4%
